A Brutal Analogy for the Indian IT Services Industry

(Disclaimer: This article is largely to be taken as a humorous piece even though there is some merit in the analogy that I have tried to paint.)

I am known for my analogies amongst colleagues and most times they serve to swiftly make the point clear and leaves the listener smiling. :-) Well........most times!

Several months ago I wrote an article likening the Behavioral Training courses and the various certifications therein to the medical testing and certification world.

Indian IT industry till at least 6-7 years ago had a dream bull run. The essence of the industry was about fulfilment and selling & consulting were nice to have functions. But in the past few years there has been a great deal of conversations about moving up the value chain and also do more of the digital or cloud transformation work.

Anyway the Indian IT industry has traditionally operated on a pyramid of revenue quality.

1. At the very top is IT Strategy / Architecture Consulting comprising 5-10% of the firm's revenues
2. In the middle is Systems Integration work, Cloud Transformation, Digital Transformation etc which constitutes some 20-30% of revenues. (maybe more if the reporting definitions are tweaked)
3. And the bottom of the pyramid revenues consist of Application Development & Maintenance, Testing, Professional Services etc which is between 60 - 75% of revenues. (again could change depending on 2 above)

Clearly revenues under item number 3 are predictable, sticky and profitable at most times. The Indian IT industry was weaned on this diet for several decades. This is the work that finally pays all the bills. But things have started to change in the past few years. Forward looking firms have a plan to cannibalize projects in bucket 3 and convert them to bucket 2 kind of work. There is great pressure from the analysts and the street to understand progress on the bucket 2 work at IT services firms. How the shape of the chart in future will look like is not very certain, but it does appear that a pie chart may replace the pyramid. This will obviously have an impact on the organization structure and the kinds of people that will work in such firms. And as firms talk of moving up the value chain there is a compelling need to re-orient client facing people to be able to pitch and win more of the Bucket (2) and (1) kind of deals.

And this is where my analogy starts to kick in. :-)

(Let me hasten to add here that there is dignity in every form of work and it is both in the eyes of the person doing the work as well as in the person getting the services. As I said this is a mere analogy to drive home a point.)

My analogy for the Bucket 3 work is that of the maid / servant / house help in Indian homes; mopping the floor, cleaning utensils, washing clothes maybe. The more differentiated ones may even chop vegetables, or buy vegetables or perhaps make roti or chapati. And just to reiterate, we missed their services intensely during the lockdown and realized their true worth only then.

Bucket 2 work could be electrician, plumber, carpenter, mason, driver, dry cleaners, tutor for children, wifi vendor, Cable TV operator etc. You know the drift?

Bucket 1 work is financial consultant, architect, interior decorator, personal trainer, share broker etc

Now the problem is, if you are positioned in the eyes of the house owner as a maid / servant / house help, then its very difficult to ask for the deal for taking tuitions for the children (say) :-) or worse to ask for the opportunity to do the remodeling of the house. :-)

One hears of teams that have been serving an account for very long, being smug and complacent. They periodically report back to the management about how great they are doing in the account and how the client loves them. Chances are they have been largely doing the house help kind of work for their clients. And then suddenly one day the requirement for the house help disappears in the account and the only work being outsourced is the WiFi related work or say the need for a personal trainer. The house owner just goes to the market or talks to neighbors and finds appropriate vendors. S/he won't ask the house help if s/he can do that work too. That is when you get to hear things like, "Oh that digital transformation deal was awarded to X firm and we were not even invited to the RFP process. Our perception as a firm is no good. We are not seen as thought leaders"

When this happens in your account, know it for sure that your firm's and rather importantly, your own perception is that of a house help at the client organization. Moving up the value chain is about significantly changing this perception with your client. It is not easy but neither is it impossible in the IT services world. It does require very different kinds of professionals to be engaging with the client to give confidence about the credentials to do the higher value work. Unlike the house help who in real life may come from an economically deprived background, the client partners at large firms are from a much better economic and educational background. It therefore becomes essential for them to pivot quickly, learn rapidly and adapt themselves as trusted advisors to their clients using the longer tenure and relationships with the key folks in the client organization.

Several of the leading Indian IT firms have grown for years on the back of a boom in the business in the bucket 3 category. And when you have been successful and the markets have rewarded you for it, it becomes very hard to accept and make the change or the pivot to bucket 2 or 1.

If in your internal sales reviews your client partner or the sales leads keep using "number of resources" as a metric to show progress, know for a fact that they still have the "house help / maid / servant" mentality. The discussions should pivot to business metrics, industry standards, competition benchmarks, processes, market creation and optimization. For this to happen, behaviors need to change substantially at the level of the client partners. Industry familiarization, understanding competitive metrics, grasp of the business processes, knowledge of OEMs all become very key and to make this happen it is crucial that the client partners have access to an ecosystem that supports them in this endeavor.

PS: It is a known fact that top IT firms have stipulated that people working in AO, ADMS, Testing projects HAVE to upskill themselves and move into SI (Bucket 2) or Consulting (Bucket 1) work. Else their jobs are under threat over the medium term. Likewise there is a pressure to have folks move from the SI space into the Consulting space as well.